Hey there.
Papillonss can be wonderful with kids, but they key is that they have to be gentle and have respect for the dog. The same thing goes for any dog, but it's especially important with smaller dogs that can be more easily injured by rough play. (I'm not saying "no roughhousing"! My little guy loves to wrestle with me, I just have to be gentler with him than I am with, say, my Border Collie)
I don't see why a Pap would do poorly in a home with kids, as they are a very playful breed when it comes to being with their families. Supervision is the key, with the younger kids & paps, however. I wouldn't ever leave any dog, of any breed, unattended with young children.
Oh and I disagree with the statement that Papillons are difficult to groom. My dog is bathed once, SOMETIMES twice monthly, and his ear fringe/tail/leg feathering is combed a couple of times per week. He has lovely silky hair that isn't very prone to matting. He also does have a slightly shorter coat than many of the papillons you see in the show ring (I personally do not care for that look, I think they look like Pomeranians who have had their hair relaxed.) so perhaps a dog with a longer, thicker coat would need daily combing. Still, they're tiny dogs and it doesn't take much more than 5 minutes a day to brush them. You can do that when you're watching TV.
I think rescue is a great idea, I'd check your local shelters for any dogs that might fit your description. One problem with rescuing small dogs is that small-dog or breed rescues tend to take them, and most private rescues will not place small dogs with children. I looked long and hard for a rescue papillon and found nothing, so I went to a breeder. Should you decide to buy from a breeder, PLEASE make sure you buy from an ethical, reputable breeder. The papillon club of america has a breeder referral, I would personally go through them to find a breeder. You might be put on a waiting list for a pup, but it is well worth it.
I'm not an expert on the breed but I do paps fairly well so if you have any questions regarding them, feel free to ask.
Good luck in your search!